Home |Tax returns filing | One of my friends bought a property from an NRI but he was not aware about tax deducted at source (TDS) and missed to deduct it before registration. We confirmed from the seller that there is no capital gains from the property. What step should we take to avoid any loss?

One of my friends bought a property from an NRI but he was not aware about tax deducted at source (TDS) and missed to deduct it before registration. We confirmed from the seller that there is no capital gains from the property. What step should we take to avoid any loss?

Sameera
Answered on February 05,2020

When a property has been purchased from an NRI, TDS is required to be deducted on the payment made. Here, the section 194IA for TDS on sale of immovable property is not applicable; therefore, the buyer will have to deduct TDS at 20% in case of long-term capital gains and 30% in case of short-term capital gains, (and any additional surcharge and cess) instead of the 1% rate of TDS applicable under section 194IA. This TDS is deducted on the capital gains arising to the NRI from the sale of the property. It is recommended that you obtain an undertaking from the seller about his residential status and that there are no capital gains arising to him from the transactions on which tax is required to be paid.

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